BRT Apartments Corp. 10-Q

Item 1. Financial Statements BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Amounts in thousands, except per share data) September 30, 2024 December 31, 2023 (unaudited) (audited) ASSETS Real estate properties, net of accumulated depreciation and amortization of $ 99,899 and $ 80,499 $ 621,379 $ 635,836 Investments in unconsolidated joint ventures 31,573 34,242 Cash and cash equivalents 45,801 23,512 Restricted cash — 632 Other assets 18,988 15,741 Total Assets $ 717,741 $ 709,963 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 4,254 and $ 4,009 $ 447,147 $ 422,427 Junior subordinated notes, net of deferred costs of $ 242 and $ 257 37,158 37,143 Credit facility — — Accounts payable and accrued liabilities 23,669 21,948 Total Liabilities 507,974 481,518 Commitments and contingencies Equity: BRT Apartments Corp. stockholders' equity: Preferred shares $ 0.01 par value 2,000 shares authorized, none outstanding — — Common stock, $ 0.01 par value, 300,000 shares authorized; 17,798 and 17,536 shares outstanding 178 175 Additional paid-in capital 270,406 267,271 Accumulated deficit ( 60,716 ) ( 38,986 ) Total BRT Apartments Corp. stockholders’ equity 209,868 228,460 Non-controlling interest ( 101 ) ( 15 ) Total Equity 209,767 228,445 Total Liabilities and Equity $ 717,741 $ 709,963 See accompanying notes to consolidated financial statements. 2 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (Amounts in thousands, except shares and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Rental and other revenue from real estate properties $ 24,177 $ 23,510 $ 71,253 $ 69,704 Interest and other income 219 342 408 405 Total revenues 24,396 23,852 71,661 70,109 Expenses: Real estate operating expenses - including $ 9 and $ 9 to related parties for the three months ended and $ 26 and $ 25 for the nine months ended 11,187 10,583 32,612 31,565 Interest expense 5,745 5,581 16,768 16,577 General and administrative - including $ 208 and $ 141 to related parties for the three months ended and $ 569 and $ 479 for the nine months ended 3,811 4,017 11,776 11,920 Depreciation and amortization 6,499 6,544 19,400 22,095 Total expenses 27,242 26,725 80,556 82,157 Total revenues less total expenses ( 2,846 ) ( 2,873 ) ( 8,895 ) ( 12,048 ) Equity in earnings of unconsolidated joint ventures 369 426 986 1,705 Equity in earnings from sale of unconsolidated joint ventures properties — — — 14,744 Gain on sale of real estate — 604 — 604 Insurance recovery of casualty loss — 261 — 476 Gain on insurance recoveries — — — 240 (Loss) income from continuing operations ( 2,477 ) ( 1,582 ) ( 7,909 ) 5,721 Income tax (benefit) provision ( 310 ) ( 122 ) ( 297 ) 5 (Loss) income from continuing operations, net of taxes ( 2,167 ) ( 1,460 ) ( 7,612 ) 5,716 Net income attributable to non-controlling interest ( 38 ) ( 34 ) ( 109 ) ( 106 ) Net (loss) income attributable to common stockholders $ ( 2,205 ) $ ( 1,494 ) $ ( 7,721 ) $ 5,610 Weighted average number of shares of common stock outstanding: Basic 17,796,206 17,851,715 17,720,024 18,022,975 Diluted 17,796,206 17,851,715 17,720,024 18,045,767 Per share amounts attributable to common stockholders: Basic $ ( 0.12 ) $ ( 0.08 ) $ ( 0.41 ) $ 0.30 Diluted $ ( 0.12 ) $ ( 0.08 ) $ ( 0.41 ) $ 0.27 See accompanying notes to consolidated financial statements. 3 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Dollars in thousands, except per share data) Shares of Common Stock Additional Paid-In Capital (Accumulated Deficit) Non- Controlling Interest Total Balances, December 31, 2023 $ 175 $ 267,271 $ ( 38,986 ) $ ( 15 ) $ 228,445 Distributions - common stock - $ 0.25 per share — — ( 4,641 ) — ( 4,641 ) Restricted stock and restricted stock units vesting 2 ( 2 ) — — — Compensation expense - restricted stock and restricted stock units — 1,342 — — 1,342 Distributions to non-controlling interests — — — ( 60 ) ( 60 ) Shares issued through DRIP — 931 — — 931 Shares repurchased ( 1 ) ( 2,266 ) — — ( 2,267 ) Net (loss) income — — ( 3,171 ) 35 ( 3,136 ) Balances, March 31, 2024 $ 176 $ 267,276 $ ( 46,798 ) $ ( 40 ) $ 220,614 Distributions - common stock - $ 0.25 per share — — ( 4,678 ) — ( 4,678 ) Restricted stock and restricted stock units vesting 1 ( 1 ) — Compensation expense - restricted stock and restricted stock units — 1,090 — — 1,090 Distributions to non-controlling interests — — — ( 60 ) ( 60 ) Shares issues through DRIP 1 946 — — 947 Shares repurchased ( 1 ) ( 929 ) — — ( 930 ) Net (loss) income — — ( 2,345 ) 36 ( 2,309 ) Balances, June 30, 2024 $ 177 $ 268,382 $ ( 53,821 ) $ ( 64 ) $ 214,674 Distributions - common stock - $ 0.25 per share — — ( 4,690 ) — ( 4,690 ) Compensation expense - restricted stock and restricted stock units — 1,189 — — 1,189 Distributions to non-controlling interests — — — ( 75 ) ( 75 ) Shares issues through DRIP 1 950 — — 951 Shares repurchased — ( 115 ) — — ( 115 ) Net (loss) income — — ( 2,205 ) 38 ( 2,167 ) Balances, September 30, 2024 $ 178 $ 270,406 $ ( 60,716 ) $ ( 101 ) $ 209,767 See accompanying notes to consolidated financial statements. 4 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EQUITY (Unaudited) (Dollars in thousands, except per share data) Shares of Common Stock Additional Paid-In Capital (Accumulated Deficit) Non- Controlling Interest Total Balances, December 31, 2022 $ 180 $ 273,863 $ ( 23,955 ) $ ( 18 ) $ 250,070 Distributions - common stock - $ 0.25 per share — — ( 4,847 ) — ( 4,847 ) Restricted stock and restricted stock units vesting 2 ( 2 ) — — — Compensation expense - restricted stock and restricted stock units — 1,410 — — 1,410 Shares issued through DRIP — 763 — — 763 Net (loss) income — — ( 4,098 ) 36 ( 4,062 ) Balances, March 31, 2023 $ 182 $ 276,034 $ ( 32,900 ) $ 18 $ 243,334 Distributions - common stock - $ 0.25 per share — — ( 4,816 ) — ( 4,816 ) Compensation expense - restricted stock and restricted stock units — 1,193 — — 1,193 Distributions to non-controlling interests — — — ( 37 ) ( 37 ) Shares issued through DRIP — 670 — — 670 Shares repurchased ( 3 ) ( 5,833 ) — — ( 5,836 ) Net income — — 11,202 36 11,238 Balances, June 30, 2023 $ 179 $ 272,064 $ ( 26,514 ) $ 17 $ 245,746 Distributions - common stock - $ 0.25 per share — — ( 4,654 ) — ( 4,654 ) Compensation expense - restricted stock and restricted stock units — 1,473 — — 1,473 Distributions to non-controlling interests — — — ( 42 ) ( 42 ) Shares issued through DRIP — 684 — — 684 Shares repurchased ( 2 ) ( 4,948 ) — — ( 4,950 ) Net (loss) income — — ( 1,494 ) 34 ( 1,460 ) Balances, September 30, 2023 $ 177 $ 269,273 $ ( 32,662 ) $ 9 $ 236,797 See accompanying notes to consolidated financial statements. 5 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) Nine Months Ended September 30, 2024 2023 Cash flows from operating activities: Net (loss) income $ ( 7,612 ) $ 5,716 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 19,400 22,095 Amortization of deferred financing costs 866 799 Amortization of debt fair value adjustment 421 463 Amortization of restricted stock and restricted stock units 3,621 4,076 Equity in earnings of unconsolidated joint ventures ( 986 ) ( 1,705 ) Equity in earnings from sale of unconsolidated joint venture properties — ( 14,744 ) Gain on sale of real estate — ( 604 ) Gain on insurance recovery — ( 240 ) Increases and decreases from changes in other assets and liabilities: Increase in other assets ( 809 ) ( 1,762 ) Increase in accounts payable and accrued liabilities 1,661 1,575 Net cash provided by operating activities 16,562 15,669 Cash flows from investing activities: Improvements to real estate properties ( 4,943 ) ( 7,406 ) Proceeds from the sale of real estate — 711 Distributions from unconsolidated joint ventures 3,821 24,646 Contributions to unconsolidated joint ventures ( 166 ) ( 122 ) Proceeds from insurance recoveries — 240 Net cash (used in) provided by investing activities ( 1,288 ) 18,069 Cash flows from financing activities: Proceeds from mortgages payable 27,375 21,173 Mortgage principal payments ( 2,831 ) ( 2,435 ) Repayment of credit facility — ( 19,000 ) Increase in deferred financing costs ( 1,216 ) ( 683 ) Dividends paid ( 13,949 ) ( 14,251 ) Distributions to non-controlling interests ( 195 ) ( 79 ) Proceeds from issuance of DRIP shares 2,829 2,117 Repurchase of shares of common stock ( 3,312 ) ( 10,786 ) Net cash provided by ( used in) financing activities 8,701 ( 23,944 ) Net increase in cash, cash equivalents, restricted cash and escrows: $ 23,975 $ 9,794 Cash, cash equivalents, restricted cash and escrows at beginning of period 31,775 27,721 Cash, cash equivalents, restricted cash and escrows at end of period $ 55,750 $ 37,515 Supplemental disclosure of cash flow information: Cash paid during the period for interest expense $ 15,434 $ 15,310 Cash paid for income taxes and excise taxes $ 58 $ 710 See accompanying notes to consolidated financial statements. 6 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the consolidated statements of cash flows. September 30, 2024 2023 Reconciliation of cash and cash equivalents and restricted cash: Cash and cash equivalents $ 45,801 $ 28,117 Restricted cash — 769 Escrows (Other assets) 9,949 8,629 Total cash, cash equivalents, restricted cash and escrows shown in consolidated statement of cash flows $ 55,750 $ 37,515 7 Table of Contents BRT APARTMENTS CORP. AND SUBSIDIARIES Notes to Consolidated Financial Statements September 30, 2024 Note 1 – Organization and Background BRT Apartments Corp. (the "Company" or "BRT"), a Maryland corporation, owns, operates and, to a lesser extent, holds interests in joint ventures that own multi-family properties. The Company conducts its operations to qualify as a real estate investment trust, or REIT, for federal income tax purposes. These multi-family properties may be wholly owned by the Company (including its consolidated subsidiaries) or by unconsolidated joint ventures in which the Company generally contributed a significant portion of the equity. At September 30, 2024, the Company: (i) wholly-owns 21 multi-family properties located in 11 states with an aggregate of 5,420 units and a carrying value of $ 619,525,000 ; (ii) has interests, through unconsolidated entities, in eight multi-family properties located in four states with an aggregate of 2,527 units with a carrying value of $ 31,573,000 ; and (iii) owns other assets, through consolidated and unconsolidated subsidiaries, with a carrying value of $ 1,854,000 . The 29 multi-family properties are located in 11 states; most of these properties are located in the Southeast United States and Texas. Note 2 – Basis of Preparation The accompanying interim unaudited consolidated financial statements, reflect all normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of the results for such interim periods. The results of operations for the three and nine months ended September 30, 2024 and 2023, are not necessarily indicative of the results for the full year. The consolidated audited balance sheet as of December 31, 2023, has been derived from the audited financial statements at that date but does not include all the information and footnotes required by accounting principles generally accepted in the United States ("GAAP"). Accordingly, these unaudited statements should be read in conjunction with the Company's audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report") filed with the Securities and Exchange Commission ("SEC"). The consolidated financial statements include the accounts and operations of the Company and its wholly-owned subsidiaries. The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting. For each venture, the Company evaluated the rights provided to each party in the venture to assess the consolidation of the venture. All investments in unconsolidated joint ventures have sufficient equity at risk to permit the entity to finance its activities without additional subordinated financial support and, as a group, the holders of the equity at risk have power through voting rights to direct the activities of these ventures. As a result, none of these joint ventures are variable interest entities ("VIEs"). Additionally, as determined in accordance with GAAP, the Company does not exercise substantial operating control over these entities, and therefore the entities are not consolidated. These investments are recorded initially at cost, as investments in unconsolidated joint ventures, and subsequently adjusted for their share of equity in earnings, cash contributions and distributions. The distributions to each joint venture partner are determined pursuant to the applicable operating agreement and may not be pro-rata to the percentage equity interest each partner has in the applicable venture. The joint venture that owns a property in Yonkers, New York, was determined not to be a VIE but is consolidated because the Company has controlling rights in such entity. The Company reviews each real estate asset owned, including those held through investments in unconsolidated joint ventures, for impairment when there is an event or a change in circumstances indicating that the carrying amount may not be recoverable. The Company measures and records impairment charges, and reduces the carrying value of owned properties, when indicators of impairment are present and the expected undiscounted cash flows related to those properties are less than their carrying amounts. For its unconsolidated joint venture investments, the Company measures and records impairment losses, and reduces the carrying value of the equity investment when indicators of impairment are present and the expected discounted cash flows related to the investment is less than the carrying value. When the Company does not expect to recover its carrying value on properties held for use, the Company reduces its carrying value to fair value, and for properties held for sale, the Company reduces its carrying value to the fair value less costs to sell. When the Company does not expect to recover its carrying value on unconsolidated joint ventures that are under contract for sale, the Company, when it is determined that the sale is probable, reduces its carrying value to its fair value. 8 Table of Contents The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements. Actual results could differ from those estimates. Substantially all of the Company's assets are comprised of multi- family real estate assets generally leased to tenants on a one-year basis. Therefore, the Company aggregates real estate assets for reporting purposes and operates in one reportable segment. The Company’s Chief Operating Decision Makers (“CODMs”) are its Chief Executive Officer and Chief Operating Officer. As the Company operates in one reportable segment, the CODMs are provided financial reports which include (i) a consolidated income statement (detailing total revenues, total operating expenses, operating income and net income) and (iii) Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”). These financial reports assist the CODMs in assessing the Company’s financial performance and in allocating resources appropriately. Reclassifications Immaterial Error Correction During the preparation of financial statements for the current period, it was determined that in the prior year period, the Company was not correctly including the escrow accounts classified within other assets within cash flows from operating activities on the Consolidated Statements of Cash Flows. As a result, the Company made an immaterial error correction to the prior year period to reclassify the escrows within Cash and Restricted Cash on the Statement of Cash Flows resulting in a increase in net cash from operating activities of $ 2,061,000 . Note 3 - Equity Equity Distribution Agreements The Company has equity distribution agreements with three sales agents to sell up to $ 40,000,000 of its common stock from time-to-time in an at-the-market offering. During the three and nine months ended September 30, 2024 and 2023, the Company did not sell any shares. Common Stock Dividend Distribution The Company declared a quarterly cash distribution of $ 0.25 per share, payable on October 2, 2024 to stockholders of record on September 24, 2024. Dividend Reinvestment Plan The Dividend Reinvestment Plan (the “DRP”), among other things, provides stockholders with the opportunity to reinvest all or a portion of their cash dividends paid on the Company’s common stock in additional shares of its common stock, at a discount, determined in the Company’s sole discretion, of up to 5 % from the market price for the common stock (as such price is calculated pursuant to the DRP). The discount from the market price is currently 3 %. During the three and nine months ended September 30, 2024, 56,879 and 165,731 shares were issued in lieu of cash dividends of $ 951,000 and $ 2,829,000 respectively. During the three and nine months ended September 30, 2023, 35,470 and 111,322 shares were issued in lieu of cash dividends of $ 684,000 and $ 2,117,000 , respectively. Stock Based Compensation In June 2024, the Company's stockholders approved the 2024 Incentive Plan (the "2024 Plan"). This plan permits the Company to grant: (i) stock options, restricted stock, restricted stock units, performance shares awards and any one or more of the foregoing, for up to a maximum of 1,000,000 shares; and (ii) cash settled dividend equivalent rights in tandem with the grant of restricted stock units and certain performance based awards. As of September 30, 2024, 784,675 shares are available for issuance pursuant to awards under the 2024 Plan. Awards to acquire 1,602,722 shares of common stock are outstanding under the 2024 Plan, the 2022 Amended and Restated Incentive Plan (the "2022 Plan"), the 2020 Amended and Restated Incentive Plan (the "2020 Plan"), and the 2018 Amended and Restated Incentive Plan (the "2018 Plan; and together with the 2020 Plan and the 2022 Plan, the "Prior Plans"). No further awards may be granted pursuant to the Prior Plans. 9 Table of Contents Restricted Stock Units In July 2024, the Company issued restricted stock units (the "RSUs") to acquire up to 215,325 shares of common stock pursuant to the 2024 Plan. As of September 30, 2024 , an aggregate of 640,493 of unvested restricted stock units are outstanding pursuant to the 2024 Plan and the Prior Plans. Generally, the RSUs entitle the recipients, subject to continued service through the three-year vesting period to receive (i) the underlying shares if and to the extent certain performance and/or market conditions are satisfied at the vesting date, and (ii) an amount equal to the cash dividends that would have been paid during the three-year performance period with respect to the shares of common stock underlying the RSUs if, when, and to the extent, the related RSUs vest. The shares underlying the RSUs are not participating securities but are contingently issuable shares. Expense is recognized on the RSUs which the Company expects to vest over the applicable vesting period. For the three months ended September 30, 2024 and 2023, the Company recorded $ 303,000 and $ 651,000 , respectively, and for the nine months ended September 30, 2024 and 2023, the Company recorded $ 1,006,000 and $ 1,534,000 , respectively of compensation expense related to the amortization of unearned compensation with respect to the RSUs. At September 30, 2024 and December 31, 2023, $ 2,125,000 and $ 1,999,000 of compensation expense, respectively, has been deferred and will be charged to expense over the remaining vesting periods. Restricted Stock As of September 30, 2024 , an aggregate of 962,229 shares of unvested restricted stock are outstanding. The shares of restricted stock vest five years from the date of grant and under specified circumstances, including a change in control, may vest earlier. For financial statement purposes, the restricted stock is not included in the outstanding shares shown on the consolidated balance sheets until they vest, but is included in the earnings per share computation. For the three months ended September 30, 2024 and 2023, the Company recorded $ 886,000 and $ 822,000 , respectively and for the nine months ended September 30, 2024 and 2023, the Company recorded $ 2,615,000 and $ 2,542,000 , respectively, of compensation expense related to the amortization of unearned compensation with respect to the restricted stock awards. At September 30, 2024 and December 31, 2023, $ 7,958,000 and $ 7,484,000 , respectively has been deferred as unearned compensation and will be charged to expense over the remaining vesting periods of these restricted stock awards. The weighted average remaining vesting period of these restricted stock awards is 2.2 years. Share Repurchase Pursuant to the Company’s repurchase program, as amended from time to time, the Company is authorized to repurchase shares of its common stock through open-market transactions, privately negotiated transactions, or otherwise. During the three months ended September 30, 2024, the Company repurchased 6,563 shares of common stock at an average price per share of $ 17.55 for an aggregate cost of $ 115,000 . During the nine months ended September 30, 2024, the Company repurchased 183,243 shares of common stock at an average price of $ 18.08 for an aggregate cost of $ 3,312,000 . As of September 30, 2024, the Company is authorized to repurchase up to $ 6,271,000 of shares through December 31, 2025. During the three months ended September 30, 2023 the Company repurchased 264,165 shares of common stock at an average price per share of $ 18.74 for an aggregate cost of $ 4,950,000 . During the nine months ended September 30, 2023, the Company repurchased 573,318 shares of common stock at an average price per share of $ 18.81 for an aggregate cost of $ 10,786,000 . Per Share Data Basic earnings per share is determined by dividing net income applicable to common stockholders for the applicable period by the weighted average number of shares of common stock outstanding during such period. Net income is also allocated to the unvested restricted stock outstanding during each period, as the restricted stock is entitled to receive dividends and is therefore considered a participating security. The RSUs are excluded from the basic earnings per share calculation as they are not participating securities. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into shares of common stock or resulted in the issuance of shares of common stock that share in the earnings of the Company. Diluted earnings per share is determined by dividing net income applicable to common stockholders for the applicable period by the weighted average number of shares of common stock deemed to be outstanding during such period. In calculating diluted earnings per share, the Company includes only those shares underlying the RSUs that it anticipates 10 Table of Contents will vest based on management's estimates as of the end of the most recent quarter. The Company excludes any shares underlying the RSUs from such calculation if their effect would have been anti-dilutive. The following table provides a reconciliation of the numerator and denominator of earnings per share calculations (amounts in thousands, except per share amounts): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Numerator for basic and diluted earnings per share: Net (loss) income $ ( 2,167 ) $ ( 1,460 ) $ ( 7,612 ) $ 5,716 Deduct net income attributable to non-controlling interests ( 38 ) ( 34 ) ( 109 ) ( 106 ) Deduct loss (income) allocated to unvested restricted stock 113 73 398 ( 268 ) Net (loss) income available for common stockholders: basic and diluted $ ( 2,092 ) $ ( 1,421 ) $ ( 7,323 ) $ 5,342 Denominator for basic earnings per share: Weighted average number of common shares outstanding 17,796,206 17,851,715 17,720,024 18,022,975 Effect of dilutive securities: RSUs — — — 22,792 Denominator for diluted earnings per share: Weighted average number of shares 17,796,206 17,851,715 17,720,024 18,045,767 (Loss) earnings per common share, basic $ ( 0.12 ) $ ( 0.08 ) $ ( 0.41 ) $ 0.30 (Loss) earnings per common share, diluted $ ( 0.12 ) $ ( 0.08 ) $ ( 0.41 ) $ 0.27 Note 4 - Leases Lessor Accounting The Company owns a commercial building in Yonkers, NY leased to two retail tenants under operating leases expiring from 2028 to 2035, with tenant options to extend the leases. Revenues from such leases are reported as rental income, net, and are comprised of (i) lease components, which includes fixed lease payments and (ii) non-lease components, which includes reimbursements of property level operating expenses. The Company does not separate non-lease components from the related lease components, as the timing and pattern of transfer are the same, and accounts for the combined component in accordance with ASC 842. Rental revenue from multi-family properties is recorded when due from residents and is recognized monthly as it is earned. Rental payments are due in advance. Leases on residential properties are generally for terms that do not exceed one year . Lessee Accounting The Company is a lessee under a ground lease in Yonkers, NY which is classified as an operating lease. The ground lease expires on June 30, 2045. There are no renewal options. As of September 30, 2024, the remaining lease term is 20.8 years. The Company is a lessee under a corporate office lease in Great Neck, New York, which is classified as an operating lease. The lease expires on December 31, 2031 and provides a five-year renewal option. As of September 30, 2024, the remaining lease term, including renewal options deemed exercised, is 12.3 years. As of September 30, 2024, the Company's Right of Use ("ROU") assets and lease liabilities were $ 2,047,000 and $ 2,205,000 , respectively. As of December 31, 2023, the Company's ROU assets and lease liabilities were $ 2,183,000 and $ 2,318,000 , respectively. The discount rate applied to measure each ROU asset and lease liability is based on the Company’s incremental borrowing rate (“IBR”). The Company considers the general economic environment and its historical borrowing rate activity and factors in various financing and asset specific adjustments to ensure the IBR is appropriate to the intended use of the underlying lease. 11 Table of Contents As the Company did not elect to apply the hindsight practical expedient, lease term assumptions determined under ASC 840 were carried forward and applied in calculating the lease liabilities recorded under ASC 842. The Company’s ground lease offers a renewal option which it assesses against relevant economic factors to determine whether it is reasonably certain of exercising or not exercising the option. Lease payments associated with renewal periods that the Company is reasonably certain will be exercised, if any, are included in the measurement of the corresponding lease liability and ROU asset. Note 5 ‑ Real Estate Properties Real estate properties, consists of the following (dollars in thousands): September 30, 2024 December 31, 2023 Land $ 74,246 $ 74,246 Building 616,979 616,979 Building improvements 30,053 25,110 Real estate properties 721,278 716,335 Accumulated depreciation ( 99,899 ) ( 80,499 ) Total real estate properties, net $ 621,379 $ 635,836 A summary of real estate properties owned is as follows (dollars in thousands): December 31, 2023 Balance Improvements Depreciation September 30, 2024 Balance Multi-family $ 634,045 $ 4,797 $ ( 19,317 ) $ 619,525 Retail shopping center and other 1,791 146 ( 83 ) 1,854 Total real estate properties $ 635,836 $ 4,943 $ ( 19,400 ) $ 621,379 On October 10, 2024, the Company sold a cooperative apartment unit in New York, NY for a sale price of $ 1,050,000 and will recognize a gain of approximately $ 806,000 in the quarter ending December 31, 2024. Note 6 - Restricted Cash Restricted cash represents funds held for specific purposes and are therefore not available for general corporate purposes. The restricted cash reflected on the consolidated balance sheets represents funds that are held by the Company specifically for capital improvements at certain multi-family properties owned by unconsolidated joint ventures. 12 Table of Contents Note 7 – Investment in Unconsolidated Ventures At September 30, 2024 and December 31, 2023, the Company held interests in unconsolidated joint ventures that own eight multi-family properties (the "Unconsolidated Properties"), one which was in development at December 31, 2023. The condensed balance sheets below present information regarding such properties (dollars in thousands): September 30, 2024 December 31, 2023 ASSETS Real estate properties, net of accumulated depreciation of $ 78,684 and $ 69,970 $ 320,839 $ 275,874 Cash and cash equivalents 6,104 6,447 Other assets (1) 8,951 54,715 Total Assets $ 335,894 $ 337,036 LIABILITIES AND EQUITY Liabilities: Mortgages payable, net of deferred costs of $ 912 and $ 1,135 $ 251,982 $ 246,966 Accounts payable and accrued liabilities 9,046 8,751 Total Liabilities 261,028 255,717 Commitments and contingencies Equity: Total unconsolidated joint venture equity 74,866 81,319 Total Liabilities and Equity $ 335,894 $ 337,036 BRT's interest in joint venture equity $ 31,573 $ 34,242 _______________________________________________________ (1) Includes $ 46,508 of work -in-process related to the Stono Oaks development at December 31, 2023. . At the indicated dates, real estate properties of the unconsolidated joint ventures consist of the following (dollars in thousands): September 30, 2024 December 31, 2023 Land $ 46,331 $ 46,331 Building 344,546 291,473 Building improvements 8,646 8,040 Real estate properties 399,523 345,844 Accumulated depreciation ( 78,684 ) ( 69,970 ) Total real estate properties, net $ 320,839 $ 275,874 At September 30, 2024 and December 31, 2023, the weighted average interest rate on the mortgages payable is 4.41 % and 4.32 %, respectively, and the weighted average remaining term to maturity is 4.1 years and 5.0 years, respectively. 13 Table of Contents The condensed income statements below present information regarding the Unconsolidated Properties (dollars in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Revenues: Rental and other revenue $ 11,611 $ 10,636 $ 33,529 $ 34,244 Total revenues 11,611 10,636 33,529 34,244 Expenses: Real estate operating expenses 5,578 5,023 16,462 15,835 Interest expense 2,898 2,212 8,508 7,057 Depreciation 2,916 2,568 8,714 7,833 Total expenses 11,392 9,803 33,684 30,725 Total revenues less total expenses 219 833 ( 155 ) 3,519 Other equity earnings 5 3 26 119 Gain on insurance recoveries — — — 65 Gain on sale of real estate — — — 38,418 Loss on extinguishment of debt — — — ( 561 ) Net income (loss) $ 224 $ 836 $ ( 129 ) $ 41,560 BRT's equity in earnings and equity in earnings from sale of unconsolidated joint venture properties $ 369 $ 426 $ 986 $ 16,449 Subsequent to the quarter ended September 30, 2024 the Company provided an aggregate of $ 18,300,000 to joint ventures that purchased a 204 -unit multi-family property in Wilmington, North Carolina and a 184 -unit multi-family property in Kennesaw, Georgia - generally the transaction documents provide for (1) an annual return to the of approximately 13.0 % (of which 6.0 % to 6.5 % is payable monthly (to the extent of available cash-flow, with the balance of 6.5 % to 7.0 % also to be paid monthly from any remaining cash flow after sponsor's receipt of a specified return) and (2) the total amount provided, including all accrued return , in any event to be payable to the company from 2029 to 2031. 14 Table of Contents Note 8 – Debt Obligations Debt obligations consist of the following (dollars in thousands): September 30, 2024 December 31, 2023 Mortgages payable $ 451,401 $ 426,436 Junior subordinated notes 37,400 37,400 Credit facility — — Deferred financing costs (1) ( 4,496 ) ( 4,266 ) Total debt obligations, net of deferred costs $ 484,305 $ 459,570 __________________________________________ (1) Excludes $ 409 and $ 289 of deferred financing costs related to the credit facility which are reflected in other assets at September 30, 2024 and December 31, 2023 respectively. Mortgages Payable On August 22, 2024, we obtained a $ 27,375,000 mortgage on our Woodland Trails - LA Grange, GA property. The debt bears a fixed rate of interest of 5.22 %, is interest only until maturity and matures in September 2031. At September 30, 2024, the weighted average interest rate on the Company's mortgage payables was 4.09 % and the weighted average remaining term to maturity is 6.3 years. For the three months ended September 30, 2024 and 2023, interest expense, which includes amortization of deferred financing costs, was $ 4,886,000 and $ 4,774,000 , respectively. For the nine months ended September 30, 2024 and 2023, interest expense, which includes amortization of deferred financing costs, was $ 14,271,000 and $ 14,063,000 , respectively. . Credit Facility On July 9, 2024, the Company's credit facility, with an affiliate of Valley National Bank ("VNB"), was amended to, among other things, reduce the borrowing capacity from $ 60,000,000 to $ 40,000,000 , extend the facility's maturity from September 2025 to September 2027 and revise certain financial and other covenants. The facility allows the Company to borrow, subject to compliance with borrowing base requirements and other conditions, up to $ 40,000,000 . The facility can be used to facilitate the acquisition of multi-family properties, repay mortgage debt secured by multi-family properties and for operating expenses (i.e ., working capital (including dividend payments)); provided that no more than $ 25,000,000 may be used for operating expenses. The facility is secured by the cash available at VNB and the Company's pledge of the interests in the entities that own the properties, and matures in September 2027. The interest rate on the credit facility, which adjusts monthly and is subject to a floor of 6.0 %, equals one-month term SOFR plus 250 basis points. The interest rate in effect as of September 30, 2024 is 7.70 %. There is an unused facility fee of 0.25 % per annum on the total amount committed by VNB and unused by the Company. At September 30, 2024, the Company is in compliance in all material respects with its obligations under the facility. At September 30, 2024 and December 31, 2023, there was no outstanding balance on the facility and at each such date, the full amount was available to be borrowed. Interest expense for the three months ended September 30, 2024 and 2023, which includes amortization of deferred financing costs and unused fees was $ 134,000 and $ 91,000 , respectively. Interest expense for the nine months ended September 30, 2024 and 2023, which includes amortization of deferred financing costs and unused fees was $ 318,000 and $ 482,000 , respectively. The remaining deferred financing costs of $ 409,000 and $ 289,000 , are recorded as Other Assets on the Consolidated balance sheets at September 30, 2024 and December 31, 2023, respectively. Junior Subordinated Notes At September 30, 2024 and December 31, 2023, the outstanding principal balance of the Company's junior subordinated notes was $ 37,400,000 , before deferred financing costs of $ 242,000 and $ 257,000 , respectively. The interest rate on outstanding balance resets quarterly and is equal to three month term SOFR + 2.26 %. The interest rate in effect at September 30, 2024 and 2023 was 7.52 % and 7.63 %, respectively. 15 Table of Contents The junior subordinated notes require interest only payments through the maturity date of April 30, 2036, at which time repayment of the outstanding principal and unpaid interest become due. Interest expense for the three months ended September 30, 2024 and 2023, which includes amortization of deferred financing costs, was $ 725,000 and $ 716,000 , respectively. Interest expense for the nine months ended September 30, 2024 and 2023, which includes amortization of deferred financing costs, was $ 2,179,000 and $ 2,032,000 , respectively. Note 9 – Related Party Transactions The Company has retained certain of its part-time executive officers and Fredric H. Gould, a director, among other things, to participate in the Company's multi-family property analysis and approval process (which includes service on an investment committee), provide investment advice, and provide long-term planning and consulting with executives and employees with respect to other business matters, as required. The aggregate fees incurred for these services in each of the three months ended September 30, 2024 and 2023 were $ 404,000 and $ 385,000 , respectively and $ 1,214,000 and $ 1,155,000 for the nine months ended September 30, 2024 and 2023, respectively. Management of certain properties owned by the Company and certain joint venture properties is provided by Majestic Property Management Corp. ("Majestic Property"), a company wholly owned by Fredric H. Gould. Certain of the Company's officers and management directors are also officers and directors of Majestic Property. Majestic Property may also provide real estate brokerage and construction supervision services to these properties. These fees amounted to $ 9,000 and $ 17,000 for the three months ended September 30, 2024 and 2023 and $ 26,000 and $ 33,000 for the nine months ended September 30, 2024 and 2023, respectively. Pursuant to a shared services agreement between the Company and several affiliated entities, including Gould Investors L.P. ("Gould Investors"), the owner and operator of a diversified portfolio of real estate and other assets, and One Liberty Properties, Inc., a NYSE listed equity REIT, (i) the services of the part- time personnel that perform certain executive, administrative, legal, accounting and clerical functions and (ii) certain facilities and other resources, are provided to the Company by other entities. The allocation of expenses for the facilities, personnel and other resources shared by, among others, the Company and Gould Investors, is determined in accordance with such agreement and is included in general and administrative expense on the consolidated statements of operations. During the three months ended September 30, 2024 and 2023, allocated general and administrative expenses reimbursed by the Company to Gould Investors pursuant to the shared services agreement aggregated $ 208,000 and $ 141,000 , respectively and $ 569,000 and $ 478,000 for the nine months ended September 30, 2024 and 2023, respectively. Jeffrey A. Gould and Matthew J. Gould, executive officers and directors of the Company, are executive officers of Georgetown Partners, LLC, the managing general partner of Gould Investors. Note 10 – Fair Value Measurements The Company estimates the fair value of financial assets and liabilities based on the framework established in fair value accounting guidance. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). The hierarchy described below prioritizes inputs to the valuation techniques used in measuring the fair value of assets and liabilities. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring the most observable inputs to be used when available. The hierarchy is broken down into three levels based on the reliability of inputs as follows: • Level 1— inputs to the valuation methodology are quoted prices (unadjusted) for identical assets and liabilities in active markets • Level 2— inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. • Level 3— inputs to the valuation methodology are unobservable and significant to fair value. Financial Instruments Not Carried at Fair Value The following methods and assumptions were used to estimate the fair value of each class of financial instruments that are not recorded at fair value on the consolidated balance sheets: 16 Table of Contents Cash and cash equivalents, restricted cash, accounts receivable (included in other assets), accounts payable and accrued liabilities: The carrying amounts reported in the balance sheets for these instruments approximate their fair value due to the short term nature of these accounts. Junior subordinated notes: At September 30, 2024 and December 31, 2023, the estimated fair value of the notes is lower than their carrying value by approximately $ 3,504,000 and $ 3,613,000 , respectively, based on a market interest rate of 8.56 % and 8.60 %, respectively. The Company values its junior subordinated notes using a discounted cash flow analysis on the expected cash flows of each instrument. Mortgages payable: At September 30, 2024, the estimated fair value of the Company’s mortgages payable is lower than their carrying value by approximately $ 25,498,000 , assuming market interest rates between 4.57 % and 5.94 %. At December 31, 2023, the estimated fair value of the Company's mortgages payable was lower than their carrying value by approximately $ 34,195,000 , assuming market interest rates between 4.88 % and 6.23 %. Market interest rates were determined using rates which the Company believes reflects institutional lender yield requirements at the balance sheet dates. The Company values its mortgages payable using a discounted cash flow analysis on the expected cash flows of each instrument. Considerable judgment is necessary to interpret market data and develop estimated fair value. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value. The fair value of debt obligations are considered to be Level 2 valuations within the fair value hierarchy. Note 11 – Commitments and Contingencies From time to time, the Company and/or its subsidiaries are parties to legal proceedings that arise in the ordinary course of business, and in particular, personal injury claims involving the operations of the Company's properties. Although management believes that the primary and umbrella insurance coverage maintained with respect to such properties is sufficient to cover claims for compensatory damages, many of these personal injury claims also assert claims for exemplary ( i.e, punitive) damages. Generally, insurance does not cover claims for exemplary damages. Note 12 – New Accounting Pronouncement On January 1, 2024, the Company adopted the FASB ASU No. 2023-07, Segment Reporting – Improvements to Reportable Segments Disclosures , as amended, which enhances disclosures of significant segment expenses regularly provided to the chief operating decision maker. This adoption did not have any impact on its consolidated financial statements. Substantially all of the Company’s real estate assets, at acquisition, are comprised of real estate owned that is leased to tenants on a long-term basis. Therefore, the Company aggregates real estate assets for reporting purposes and operates in one reportable segment. The Company’s Chief Operating Decision Makers (“CODMs”) are its Chief Executive Officer and Chief Operating Officer. As the Company operates in one reportable segment, the CODMs are provided financial reports which include (i) a consolidated income statement (detailing total revenues, total operating expenses, operating income and net income) and (ii) Funds from Operations (“FFO”) and Adjusted Funds from Operations (“AFFO”). These financial reports assist the CODMs in assessing the Company’s financial performance and in allocating resources appropriately. Note 13 – Subsequent Events Subsequent events have been evaluated and any significant events, relative to our consolidated financial statements as of September 30, 2024, that warrant additional disclosure, have been included in the notes to the consolidated financial statements. 17 Table of Content